Agency says "the acceptance of gifts from oil and gas companies" was widespread

Coziness between some in Minerals Management Service, oil and gas industry alleged

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Washington (CNN) -- Federal inspectors overseeing oil drilling in the Gulf of Mexico accepted meals and tickets to sporting events from companies they monitored, the Interior Department's inspector general concluded in a report released Wednesday.

In one case, an inspector in the Minerals Management Service office in Lake Charles, Louisiana, conducted inspections of four offshore platforms while negotiating a job with the company, the report states. Others let oil and gas company workers fill out their inspection forms in pencil, with the inspectors writing over those entries in ink before turning them in.

Some in the same office accepted tickets to the 2005 Chick-fil-A Peach Bowl, a college football bowl game in Atlanta, Georgia. One inspector told an office clerk, "Everyone has gotten some sort of gift before at some point" from companies they regulated, according to the report.

Investigators from the inspector general's office, the Interior Department's independent watchdog agency, took their findings to federal prosecutors in Louisiana, the report states. But the U.S. attorney's office in Lake Charles declined to bring charges, according to the report.

"Through numerous interviews, we found a culture where the acceptance of gifts from oil and gas companies were widespread throughout that office," the report states. However, that culture waned after a supervisor in the agency's New Orleans, Louisiana, regional office was fired for taking a gift from a regulated company in 2007, the report found.

The period covered in the report is well before the April explosion that sank the oil rig Deepwater Horizon, resulting in a massive oil spill that well owner BP and federal authorities are trying to cap a month later. But Mary Kendall, the Interior Department's acting inspector general, said she pushed for the report's early release in the wake of the disaster.

"Of greatest concern to me is the environment in which these inspectors operate -- particularly the ease with which they move between industry and government," Kendall wrote in a letter to Interior Secretary Ken Salazar. Many of the inspectors joined MMS from the industry and had relationships with people in the business that originated "well before they took their jobs with industry or government."

"They're supposed to be the cops on the beat, and instead they're out tailgating at sports events with people they're supposed to be policing," said Wyden, who leads a Senate Environment subcommittee on public lands. "That's just not acceptable."

The Lake Charles investigation was launched shortly after another scandal emerged from within the MMS. A September 2008 inspector general's report found regulators in the agency's Colorado office received improper gifts from energy industry representatives and engaged in illegal drug use and inappropriate sexual relations with them.

Salazar, who has ordered a widespread shake-up of the agency since the Deepwater Horizon disaster in the Gulf of Mexico, called Tuesday's report "yet another reason to clean house."

"This deeply disturbing report is further evidence of the cozy relationship between some elements of MMS and the oil and gas industry," Salazar said in a statement on the report. He pledged to follow through with the inspector general's recommendations, "including taking any and all appropriate personnel actions including termination, discipline and referrals of any wrongdoing for criminal prosecution."

While the report predates the Deepwater Horizon spill, Salazar said he has asked Kendall to investigate whether inspectors failed to enforce standards aboard the rig. Its sinking left 11 men lost at sea and oil spilling into the Gulf.

Kendall is scheduled to appear before the House Natural Resources Committee on Wednesday. Wyden said Salazar "is heading in the right direction" by reorganizing the agency, but he said MMS needs a bigger shakeup.

"Secretary Salazar has moved, in my view, as it relates to royalty payments and financial irregularities," he said. "Now he has got to come down with hobnail boots on some of these ethical violations, and drain the safety swamp."

MMS collected nearly $10 billion in royalties from the energy and mining industries in 2009. Salazar announced last week that he was splitting up the agency to separate its energy development, enforcement and revenue collection divisions, saying they have conflicting missions.

The associate director for the agency's Offshore Minerals Management Program is leaving at the end of May, a month earlier than planned, in the wake of the Gulf spill.

That official, Chris Oynes, launched the investigation that resulted in former New Orleans, Louisiana, supervisor Donald Howard's firing in 2007. Howard later pleaded guilty after being accused of failing to report gifts from an offshore drilling contractor valued at more than $6,600, according to the report.

Danielle Brian, executive director of the nonprofit Project on Government Oversight, said earlier this month that the agency has been lax about collecting royalties from an industry it sees as "a partner, a client."

She pointed out that Randall Luthi, its previous director, left at the end of the Bush administration to become president of the National Ocean Industries Association, the trade association that represents offshore drillers.

"That really gives you a picture of the people who have been running the shop here," Brian said.